Jobless benefits: Falsehoods, fallacies but penalties, too

The New York TimesJanuary 13, 2014 

Suddenly it’s OK, even mandatory, for politicians with national ambitions to talk about helping the poor. This is easy for Democrats, who can go back to being the party of FDR and LBJ. It’s much more difficult for Republicans, who are having a hard time shaking their reputation for reverse Robin-Hoodism, for being the party that takes from the poor and gives to the rich.

And the reason that reputation is so hard to shake is that it’s justified. It’s not much of an exaggeration to say that right now Republicans are doing all they can to hurt the poor, and they would have inflicted vast additional harm if they had won the 2012 election. Moreover, GOP harshness toward the less fortunate isn’t just a matter of spite (although that’s part of it); it’s deeply rooted in the party’s ideology, which is why recent speeches by leading Republicans declaring that they do too care about the poor have been almost completely devoid of policy specifics.

The most important current policy development in America is the rollout of the Affordable Care Act, aka Obamacare. Most Republican-controlled states are, however, refusing to implement a key part of the act, the expansion of Medicaid, thereby denying health coverage to almost 5 million low-income Americans.

Meanwhile, those Republican-controlled states are slashing unemployment benefits, education financing and more. As I said, it’s not much of an exaggeration to say that the GOP is hurting the poor as much as it can.

What would Republicans have done if they had won the White House in 2012? Much more of the same. Bear in mind that every budget the GOP has offered since it took over the House in 2010 involves savage cuts in Medicaid, food stamps and other anti-poverty programs.

Still, can’t Republicans change their approach? The answer, I’m sorry to say, is almost surely no.

First of all, they’re deeply committed to the view that efforts to aid the poor are actually perpetuating poverty, by reducing incentives to work. And to be fair, this view isn’t completely wrong.


True, it’s total nonsense when applied to unemployment insurance.The notion that unemployment is high because we’re “paying people not to work” is a fallacy (no matter how desperate you make the unemployed, their desperation does nothing to create more jobs) wrapped in a falsehood (very few people are choosing to remain unemployed and keep collecting benefit checks).

But our patchwork, uncoordinated system of anti-poverty programs does have the effect of penalizing efforts by lower-income households to improve their position: the more they earn, the fewer benefits they can collect. In effect, these households face very high marginal tax rates. A large fraction, in some cases 80 cents or more, of each additional dollar they earn is clawed back by the government.

The question is what we could do to reduce these high effective tax rates. We could simply slash benefits; this would reduce the disincentive to work, but only by intensifying the misery of the poor. And the poor would become less productive as well as more miserable; it’s hard to take advantage of a low marginal tax rate when you’re suffering from poor nutrition and inadequate health care.

Alternatively, we could reduce the rate at which benefits phase out. In fact, one of the unheralded virtues of Obamacare is that it does just that. It doesn’t just improve the lot of the poor; it improves their incentives, because the subsidies families receive for health care fade out gradually with higher income instead of simply disappearing for anyone too affluent to receive Medicaid. But improving incentives this way means spending more, not less, on the safety net, and taxes on the affluent have to rise to pay for that spending. And it’s hard to imagine any leading Republican being willing to go down that road – or surviving the inevitable primary challenge if he did.

The point is that a party committed to small government and low taxes on the rich is, more or less necessarily, a party committed to hurting, not helping, the poor.

Will this ever change? Well, Republicans weren’t always like this. In fact, all of our major anti-poverty programs – Medicaid, food stamps, the earned-income tax credit – used to have bipartisan support. And maybe someday moderation will return to the GOP.

For now, however, Republicans are in a deep sense enemies of America’s poor. And that will remain true no matter how hard the likes of Paul Ryan and Marco Rubio try to persuade us otherwise.

The New York Times

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